Netflix: Strong Sales and Wider Margins
Key Points
In the second quarter, Netflix reported 16% year-over-year revenue growth and beat bottom-line expectations.
Operating margins improved significantly, fueled by the company's higher plan pricing.
Forward guidance looks strong on revenue, but just OK on profitability.
- 10 stocks we like better than Netflix ›
Here's our initial take on Netflix's (NASDAQ: NFLX) fiscal 2025 second-quarter financial report.
Key Metrics
| Metric | Q2 2024 | Q2 2025 | Change | vs. Expectations |
|---|---|---|---|---|
| Revenue | $9.56 billion | $11.08 billion | 16% | Beat |
| EPS | $4.88 | $7.19 | 47% | Beat |
| Free cash flow | $1.21 billion | $2.27 billion | 87% | n/a |
| Shares outstanding | 439.7 million | 434.9 million | -1% | n/a |
Netflix Turns In a Solid Performance
Wall Street had high expectations for Netflix heading into its second-quarter report, especially after a significant earnings beat in the first quarter. Analysts were expecting a 15% year-over-year increase in revenue and 45% EPS growth.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »
Although expectations were lofty, Netflix managed to beat on both the top and bottom lines. Operating margin expanded by 7 percentage points compared to the same period last year, and free cash flow increased by an impressive 87%.
Most of the growth is coming from Netflix's higher prices, as the company increased its membership plan costs in January. Also in the report, Netflix mentioned that the rollout of the Netflix Ads Suite, its proprietary ad tech platform, has been completed. Management says that it expects to roughly double ads revenue in 2025, but it is likely to become a more significant part of the company's top line in 2026 and beyond. Revenue growth was strong in all of the company's regions, especially in the Asia-Pacific region, where revenue increased 24% year over year.
During the second quarter, Netflix spent $1.6 billion on share buybacks, and still had $8.2 billion in cash on the balance sheet.
Looking ahead, Netflix expects 17.3% year-over-year revenue growth in the third quarter, although management expects operating margin to decline significantly. As management said, "Similar to past years, we expect our operating margin in the second half of 2025 will be lower than the first half due to higher content amortization and sales and marketing costs associated with our larger second half slate." The company increased its full-year revenue guidance by $1 billion at the midpoint of the range.
Immediate Market Reaction
Netflix stock was trading slightly lower after hours, but not by much. As of 4:15 p.m. ET, Netflix shares were trading about 1% lower. Although the quarter looked strong and revenue guidance was raised, shareholders may have profitability concerns for the second half of the year. It's worth noting that this reaction was before management's earnings call, which is scheduled for later in the afternoon.
What to Watch
As mentioned, Netflix's ad platform was recently completed, so any insights on ad revenue in the third and fourth quarters of the year will be important to watch.
In addition, Netflix has some highly anticipated content set to be released in the second half of the year, such as the final season of Stranger Things and Happy Gilmore 2 and the live Canelo-Crawford boxing match, so it will be interesting to see if that boosts new subscribers.
Helpful Resources
- Full earnings report
- Investor relations page
Should you invest $1,000 in Netflix right now?
Before you buy stock in Netflix, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Netflix wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $674,281!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,050,415!*
Now, it’s worth noting Stock Advisor’s total average return is 1,058% — a market-crushing outperformance compared to 179% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.
See the 10 stocks »
*Stock Advisor returns as of July 15, 2025
Matt Frankel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix. The Motley Fool has a disclosure policy.
Recommended Articles
